Chapter 13- Marketing Strategy

Question 1

Product Life Cycle

Answer 1

Product is one part of the marketing mix – for marketing to be effective, a business must be aware of its product life cycle. The product life cycle shows the different stages that a product passes through over time and the sales that can be expected at each stage.

By considering product life cycles, businesses can plan for the future. Most pass through six stages – development, introduction, growth, maturity/saturation and decline

Question 2

Product Development

Answer 2

Where the product is being conceived, suitable ideas must be investigated and then implemented, during this stage there is no income therefore no profit

Question 3

Introduction

Answer 3

The product is launched, there are low sales and so there is not much profit, the costs are incurred by the marketing campaign etc.

Question 4

Growth

Answer 4

The product is now established and the consumers are aware of it, sales go up and costs come down, as marketing is decreased

Question 5

Maturity and saturation

Answer 5

The product has reached its peak, people now have the product and competitors are starting to appear so some businesses will be forced out of the market as there are too many firms competing for the market.

Question 6

Decline

Answer 6

Customer tastes and preferences have changed and the product is now old.

Question 7

Extension Strategies

Answer 7

Ways to prolong the life of a product before it starts to decline, this is because the costs of product development are high and extension strategies help a product to generate more cash

• Product Adjustments
• Promotion

Question 8

Product Adjustment (extension strategy)

Answer 8

They make different variations of the product or update it. Updating is a common approach for technical products. For example, in the car industry films are keen to bring out updated versions of their successful models.

• Some businesses add value to their products by making
  improvements such as computer manufacturers bringing out faster
  machines
• Another common approach is to extend the range of the product –
  for example walkers’ flavours are placed into the market are they
  got the consumers to vote for their proposed new flavours
• Some companies give the impression a product has changed by
  changing the packaging

Question 9

Promotion

Answer 9

Give the product a new lease of life by advertising again

• Some businesses try to find new markets for their products for
  example local businesses might start to serve a larger region
• Investment in sizeable advertising campaign can sometimes
  rejuvenate sales – a big advertising campaign on television, for
  example, can get people interested in a product again
• Another approach is to encourage more frequent use of the
  product. An example of this might be cereal manufacturers
  persuading people to eat cereals for supper as well as for
  breakfast.

Question 10

Product Portfolio

Answer 10

• Deciding when to launch products based on the product life cycle – a
  well organised business will attempt to phase out old products and
  introduce new ones
• The product portfolio will be made up of products lines which is a
  group of products which are similar – for example televisions are a
  product line including flat screen HD widescreen and portable
  televisions.
• With a constant launch of new products, businesses can make sure a
  vacuum is not created.

Question 11

Boston Matrix

Answer 11

One problem for firms when planning their product portfolios is that it is very difficult in practice to tell what stage of the life cycle a product is at. Also, there is no standard lifetime for products.

The Boson Matrix allows firms to analyse their product portfolios.

Question 12

Relative market share

Answer 12

How strong Is the product within the market?
Is it a market leader that other products follow?
To measure this the market share of a product is compared with the strongest rival product.

Question 13

Stars

Answer 13

Product with a high market growth and high market share. This is a valuable product, it will continue to bring in revenue but will also bring in high expenditure.

These require cash to cope with the growing market. A star is likely to be profitable as it has a relatively high market share.

Question 14

Cash Cows

Answer 14

low market growth and high market share. The market is weak, so there is little chance for growth, but there is no need for investment and it constantly brings in a profit.

Question 15

Question Marks

Answer 15

Sometimes known as problem children, these products are hard, as they are in a fast-growing market and low market share, they are not bringing in much profit, but they have potential to become stars.

This can be a problem for businesses as it is unclear what should be done with these products.

Question 16

Dogs

Answer 16

Low market share and low growth, these will bring in low profit and have hardly any prospects, they don’t require much investment but they would not be a sustainable product.

Question 17

Product Lines

Answer 17

A group of products that are very similar – naturally they should avoid having too many stars and question marks

• Stars have great future potential – they are future cash cows – a
  business will need to build the brand of these products so that
  sales increase and competition is fought off successfully
• Cash cows might be milked for cash, which can be used to develop
  other products
• For question marks a business has choices, it can build the brand,
  hoping to turn it into a star, harvest the product by raising price and
  cutting promotion so that profits are increased, or divest itself of the
  product, withdrawing it or selling it because it is not making a profit

Question 18

Marketing Strategies

Answer 18

A set of plans that aim to achieve a specific marketing objective

• Some businesses sell products into mass markets – such markets are
  huge, often global, and can have millions of potential customers

Question 19

Mass markets

Answer 19

• Product: In a mass market there will be lots of similar products –
  differentiation therefore becomes key to be able to stand out
• Price: prices likely to be similar – all businesses in the market are
  likely to fear a price war because they usually reduce revenue for
  every competitor – price leadership is common in mass markets,
  lowering prices hoping everyone follows
• Promotion: in the absence of price competition – non-price
  competition is central to gain a competitive edge – this means they
  are prepared to Invest heavily in advertising and promotion
  because it is such an important part of the marketing mix in mass
  markets

Question 20

Niche markets

Answer 20

• Customers in niche markets have very particular needs, which are
  sometimes neglected by larger firms. Consequently, there is a gap in
  the market for businesses that is prepared to tailor goods or services
  to this small customer group

Product: in a niche market the product is likely to have quite significant differences from its rivals – for example Michelin star restaurants offer to a particular niche of people who want to experience the very best dining

Price: businesses selling in niche markets have more flexibility in their pricing so can charge higher prices

Promotion: in niche markets promotion and advertising will tend to be more targeted – since niche markets are smaller there is less need to use national media when advertising – businesses will identify their customer profile very accurately to ensure that advertising and promotion expenditure is not wasted